Can you smell the pumpkin spice in the air? The hottest summer in recent memory is nearing its official end, and we’re sure you’re as eager as we are for cooler fall weather (and hopefully lower energy bills).
Federal student loan borrowers, however, probably aren’t as excited about the beginning of sweater season this year. September marks the return of interest on student loans after a more than 40-month pause, while the first monthly payments are around the corner. Many borrowers will likely struggle to re-adjust, especially now that historically high interest rates are making other types of debt (looking at you, credit cards) more difficult to pay down.
We’re not going to sugar coat it: The last stretch of 2023 is gearing up to be financially stressful for a lot of people. Luckily, we're here to help you brace yourself and prep your wallet for the coming weeks. Here's what's on your to-do list:
1. Get ready to pay student loan bills again
Payments and interest on federal student loans have been paused for so long (since March 2020, to be exact), it may have seemed like they’d never come back. Alas, the time has come for nearly 40 million borrowers to resume monthly payments.
The waiver on student loan interest ends Sept. 1 (that’s today!), which means student loan balances will begin accruing interest again. The first student loan bills will come due in October, though the actual due date will vary. Student loan servicers are supposed to give borrowers 21 days notice before the first due date, per the U.S. Department of Education, so keep an eye out for that notice.
If you haven't already, you should review your repayment plan options to make sure you're in the one that fits best for your budget. The Biden administration recently launched the Saving on a Valuable Education (SAVE) plan, a new, more generous income-driven repayment plan, which may lower how much you owe each month. One of several initiatives being rolled out as part of a major revamp of the student loan system, SAVE is designed to protect more of a borrower’s income and cover unpaid interest so their balance doesn’t grow as long as monthly payments are made on time.
If you’re worried about your ability to afford your bills, note that for the first 12 months after student loan payments resume, the Education Department won’t report missed payments to credit bureaus, and no one’s loans will be placed in default or delinquency. But loans will still collect interest during this time, so borrowers will want to do their best to avoid growing their balances by paying at least the portion of interest accrual.
2. Look for better interest rates if you have credit card debt
Inflation has been kicking everyone in the budget (get it?) since mid-2021, and although prices are cooling, a lot of people have had to rely on credit cards to cover expenses. In fact, according to the most recent New York Federal Reserve data, U.S. household debt broke records again in the second quarter of the year, with auto loans and credit card debt driving much of that growth.
Credit card balances now make up about $1.03 trillion of overall household debt, a new high. The central bank’s interest rate hikes have pushed the average credit card annual percentage rate (APR) to over 20%, and a report from consumer credit scoring system VantageScore shows that credit card delinquencies rose over the summer months. Needless to say, now that Americans are faced with the highest interest rates in over 20 years, they’re having a hard time keeping up with their growing debt.
While it’s best to avoid taking on new debt, if you’re one of the many people carrying a credit card balance, you may benefit from transferring your debt to another card or product with a lower APR. Personal loans, for example, usually offer a lower interest rate than credit cards, which is why they’re such a popular option for borrowers looking to consolidate debt.
Debt.org, a nonprofit debt help organization, recommends shopping around for competing card offers — you may be able to find promotions for zero-interest balance transfers, which will allow you to move your credit card balance to another card that won’t earn interest for a certain period of time. (Though, of course, for this strategy to be most effective, you have to pay down your debt during the 0% period.)
You can also try to negotiate a lower rate with your credit card company or ask for a temporary reduction of your rate, according to Debt.org. And don’t be afraid to ask for help: Credit counselors can help you strategize to reduce your balance and customize a debt-relief plan that works for your budget (just be aware that there can be fees if you enroll in a debt management plan).
3. Start planning for Thanksgiving travel
The U.S. fall travel season starts Labor Day weekend, so while it may seem like Thanksgiving is ages away, those who have to fly somewhere for the holiday would be wise to start making plans soon. Travel booking app Hopper predicted that average airfare will peak at $283 per ticket in late November and early December as people rush to buy their tickets last-minute and prices rise with demand.
Scott Keyes of travel site Going.com, formerly Scott’s Cheap Flights, says in the website's 2023 Thanksgiving travel guide that usually, the best time to look for flights is between two and six months in advance for international trips and one to three months in advance for domestic. So in a regular year, the best deals for Thanksgiving flights are typically gone by early September. But travelers this year may have more time to snag a deal because demand has lagged on a lot of routes, and airlines have increased capacity.
“Though travel demand has bounced back, it’s still below pre-pandemic levels,” Keyes says in the guide. “That’s leaving a lot of empty seats on planes, and airlines are competing hard to fill them out.”
Going.com anticipates that the best days to book for more affordable Thanksgiving flights this year are the Sunday, Monday and Tuesday before Thanksgiving, with return flights on early Thursday morning or late that night. You can try to avoid price increases by booking before 21-, 14- and 7-day marks leading up to the holiday, when fares usually jump. In the meantime, start playing around with tools like Google Flights or Momondo to get an idea of how much you’ll have to spend.
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Rates are subject to change. All information provided here is accurate as of the publish date.